Why are novelists either really rich or really poor?

by SingSaver
One interesting facet of writers – in particular novelists – is that they exist in financial extremes. They tend to be either wealthy (think J.K. Rowling), or dirt poor (think of the stereotypical struggling writer who can’t afford to eat lunch). Almost no other profession has such extremes. This week’s Money Mysteries column explores why it happens.
The 80/20 Effect
The Pareto effect (or 80/20) effect was devised by 19th century philosopher Vilfredo Pareto. In brief, it explains that a minority of the population (the 20%) control the bulk of an economy (the 80%). (Actually today, the divide is much sharper, with the world’s top 1% owning 50% of all the wealth). Now in many industries, the Pareto effect is especially apparent. Among property agents and financial advisors, for example, only a small percentage will make millions every year. The bulk of them are probably middle income earners. In the world of the Arts however, such as literature and music, the divide is truly spectacular. There are only a few thousand successful rock stars, for example, out of millions of aspiring musicians.
The same thing happens with novelists. Out of millions of writers in the world, only a tiny percentage actually make it into the bookstores. Out of those that make it into a bookstore, an even smaller percentage will become hits. But of this small and elite club, earnings are through the roof.
Some examples: Dan Brown, most famous for The Da Vinci Code, is estimated to be worth around S$12.6 million. George R. R Martin, who writes the Game of Thrones series, is also worth about the same amount. Horror writer Stephen King (who has more famous novels than we could possibly list) was worth an estimated S$20 million in 2016. J.K. Rowling (of Harry Potter fame) is worth about S$25 million, and James Patterson was the best paid novelist of 2016, at about S$126 million.
Nonetheless, you’ll note that people still joke about penniless writers, who struggle to publish stories that are bought at a pittance. The reason is the 80/20 effect. When people walk into a bookstore, they have limited time to read books, and limited money to choose which book to purchase. Most of the time, people will pick up a book by an established writer, as opposed to one they’ve never heard of. As such, when someone picks up a J.K. Rowling or James Patterson novel, it is at the cost of another writer. This means that, while there could be millions upon millions of writers, it is always a minority that will sell most of the books and get most of the money.
It’s Expensive and Risky for Publishers to Take On a New Writer
When a publisher takes on a writer, they have to fork out money for three things. The first is the money required to print the books, and also a place to store all of them (warehousing). Granted, this is less of a cost these days, due to digital editions. The second is money for marketing. They need to promote the writer’s work, by sending them on book tours, signings, and sometimes a Public Relations campaign. The third is the writer’s advance. When a major publishing house takes on a writer, they take a bet on how much that writer’s books will earn. This amount is paid to the writer immediately, and the writer is not paid again until the royalties exceed this amount.
For example: Say you write a novel about teenage vampires. The publisher feels this is trendy, and that they can make perhaps S$3 million in book sales. They then forward you an advance of S$50,000, with a royalty of S$10 per book sold. For the first 5,000 copies sold, you would not receive any money (that’s what the advance is for). But if you were to sell 12,000 copies, you would make an additional S$70,000 (S$120,000 in royalties, minus your S$50,000 advance).
This is, overall, a better deal for the writer than the publisher. Even if the publisher turns out to be wrong, and your teenage vampire story only sells three copies to mum, dad, and your brother, you would still keep the S$50,000 (unless you signed a contract with a cutthroat and irregular publishing house).
Also, the money spent on printing and storing your books, and marketing your name, is all wasted. All of this makes publishers unwilling to take on new writers, as they’d rather bet on established names. Why would they risk giving a big advance and spending marketing money, on an unknown writer when they could give that money to George R.R. Martin? They know they’d get a return on their investment if they put money on an established name. This results in a handful of novelists getting huge advances and lavish marketing campaigns, while the unknowns tend to languish.
But You Can Self-Publish
You can indeed. But this means paying for the cost of printing, and storing all the copies. Do you have room for a few thousand books in your house?
Also, note that books are prohibitively expensive to print, unless you do so in massive numbers. You will also have to pay for your book to be in bookstores. Because you have no established brand, a bookstore won’t risk giving you shelf space as opposed to an established writer. You’ll have to pay a monthly fee, depending on the store and the location of the shelf. You’ll be responsible for restocking the books yourself. This is why most self-publishing occurs online. Of course, you’ll still need some way to market yourself, even if you only write eBooks.
There is a High Cost of Failure for Novelists
The cost of failure (i.e. writing a novel that doesn’t sell, or that a publisher won’t take) is steep. It usually takes a long time to crank out a 300 page novel. This entire article you’re reading is about four pages, and it took about three hours to write it (without having to imagine elaborate plots, speech patterns, and characters). Imagine the effort required for 300 pages. After constant revisions and editing, a novel can take anywhere from half a year to two or three years to complete (Mark Z. Danielewski’s House of Leaves –  the writer’s debut novel – famously took 10 years to complete). This is a tremendous amount of time and effort to spend on something that may not succeed.
In the time taken to write the novel, you could get a new degree for better job prospects, work for side-income, start up a small business, etc. Aspiring writers pay a lot of money to chase their passion. And if they don’t succeed, the financial cost can be high – doubly so if they write full time, and give up on months or years of income to complete their novel.
Things are Getting Better for Novelists, Though!
We’re not trying to demoralise you, so let’s end on a positive note. With the advent of self-publishing and digital books, the costs of producing a novel have fallen. Many publishers now wait to see what self-published books people read online, and then swoop in and give a book deal to the writers who are popular.
Also, because the costs have dropped, publishers are now a little more willing to take a chance on new writers. The other upside is that today, novels don’t stand alone. They are often accompanied by movie tie-ins, comic book adaptations, and even video games and toy lines. Those are all forms of income.
And of course, the true bookworms (the crowd who love the likes of Italo Calvino and Laszlo Krazsnahorkai) will tell you money should be secondary to the pursuit of great literature anyway.